International Journal of Retail & Distribution Management

Customer online shopping experience data analytics: Integrated customer

segmentation and customised services prediction model
Eugene Wong, Yan Wei,
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IJRDM
46,4
406
Received 9 June 2017
Revised 28 September 2017
29 January 2018
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Accepted 9 February 2018
International Journal of Retail &
Distribution Management
Vol. 46 No. 4, 2018
pp. 406-420
© Emerald Publishing Limited
0959-0552
DOI 10.1108/IJRDM-06-2017-0130
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0959-0552.htm
Customer online shopping
experience data analytics
Integrated customer segmentation and
customised services prediction model
Eugene Wong and Yan Wei
Department of Supply Chain and Information Management,
Hang Seng Management College, Hong Kong
Abstract
Purpose – The purpose of this paper is to develop a customer online behaviour analysis tool, segment
high-value customers, analyse their online purchasing behaviour and predict their next purchases from an
online air travel corporation.
Design/methodology/approach – An operations review of the customer online shopping process of an
online travel agency (OTA) is conducted. A customer online shopping behaviour analysis tool is developed.
The tool integrates competitors’ pricing data mining, customer segmentation and predictive analysis.
The impacts of competitors’ price changes on customer purchasing decisions regarding the OTA’s products
are evaluated. The integrated model for mining pricing data, identifying potential customers and predicting
their next purchases helps the OTA recommend tailored product packages to its individual customers with
reference to their travel patterns.
Findings – In the customer segmentation analysis, 110,840 customers are identified and segmented based on
their purchasing behaviour. The relationship between the purchasing behaviour in an OTA and the price
changes of different OTAs are analysed. There is a significant relationship between the flight duration time
and the purchase lead time. The next travel destinations of segmented high-value customers are predicted
with reference to their travel patterns and the significance of the relationships between destination pairs.
Practical implications – The developed model contributes to pricing evaluation, customer segmentation
and package customization for online customers.
Originality/value – This study provides novel method and insights into customer behaviour towards OTAs
through an integrated model of customer segmentation, customer behaviour and prediction analysis.
Keywords Customer segmentation, Data mining, Big data analytics, Customer purchase behaviour,
Online travel agencies, Recency frequency and monetary
Paper type Research paper
1. Introduction
Online shopping is increasing continuously, with 1.61 billion people worldwide
purchasing online, amounting to USD1.9 trillion in 2016. The number of people
purchasing goods and services online is expected to increase to over two billion in 2019
and the global e-retail sales amount is expected to be more than double in 2020 (Statistia,
2017). Global online travel sales have also increased in recent years. Ostdick (2017)
reported that over 148 million travel bookings are made on the internet every year and
that 57 per cent of travel reservations are made online. Travel e-commerce sites now offer
diverse products with flight, hotel and car rental packages. These online packages
are offered by various parties, such as airlines (e.g. Lufthansa and Cathay Pacific) and
online travel agencies (OTAs) (e.g. Expedia, CTrip and Zuji). Statistia (2017) indicated
that online travel sales worldwide would increase from USD564.9 billion in 2016 to
USD817.5 billion by 2020. Travel companies, especially OTAs facing severe competition
from emerging OTAs in terms of pricing, quality and cost, are actively exploring
opportunities in the online travel business. TrekkSoft (2016) revealed that tour and
activity providers are implementing online booking systems, as the online channel tends
to receive 30-40 per cent more bookings after implementing such systems.
 With the increasing number of travellers reviewing travel websites and booking tickets Customer
online, OTAs are seeking to leverage big data analytics to increase their marketing and sales online
by providing targeted customers with customised travel packages in a more proactive shopping
manner. Using massive data sets to identify high-valued customers and analyse their online
shopping behaviour is critical for OTAs to increase their market share. Determining potential experience
customers, understanding their online purchasing behaviour and predicting their next
purchases are the key factors for developing a successful online travel business. Empirical 407
studies have been carried out to understand the attributes and determinants in the selection of
OTAs (Ha and Ha, 2016; Kim et al., 2007a, b; Li and Suomi, 2007). Other studies have carried
out hypothesis to examine the motivations of online purchasing (Huang et al., 2017; Bilgihan
et al., 2016; Amaro and Duarte, 2015). To help OTAs identify and segment customers
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according to their online purchasing behaviour, various data mining models and rules have
been developed to systematically profile profitable customers. These models include the
recency, frequency and monetary (RFM) model (Dursun and Caber, 2016; Mohammadian and
Makhani, 2016; Lumsden et al., 2008), customer lifetime value (CLV) (Wang, 2015; Kumar and
Rajan, 2009), the analytic hierarchy process (Lin et al., 2016; Chiang, 2014) and association
rules (Schiaffino and Amandi, 2009; Leung et al., 2006).
Transforming the traditional business of travel agencies, OTAs are continuously
enhancing the perceived values of products by allowing customers to access and purchase
broad assortments of travel packages online in a user-friendly, low-cost and customised way.
This is achieved via the use of data mining tools to obtain massive competitors’ pricing data
and customers’ online purchasing usage data, and via the use of big data analytics tools to
analyse customers’ behaviour and predict their next purchases (Wang and Wang, 2010;
Demangeot and Broderick, 2007; Kamarulzaman, 2007; Wong et al., 2006). (Kim et al., 2007a, b)
indicated pricing as the most critical attribute for customers in purchasing air flight tickets,
followed by security. Hao et al. (2015) demonstrated the importance of customer satisfaction
on OTA websites. Big data analytics is the process of examining massive data sets and
revealing hidden patterns, unknown correlations, market trends and customer preferences
(White, 2012). Thus, it is important for online retail businesses with huge petabytes of
information about transactions, customer behaviour and purchasing record to collect and
analyse such data every hour (Bradlow et al., 2017). In this study, an integrated data mining
and analytics model is developed; thereafter an operations review is conducted in the Hong
Kong office of an international OTA. The online flight ticket pricing figures of the OTA’s
competitors are crawled in the model for real-time data analysis. Customer data are profiled
and segmented for passenger travel behaviour analysis. Ten travel destinations are selected
for review. The ticket prices of the selected OTA and five of its rival OTAs are obtained
through Web data crawling every day for five months. Overall, 110,843 customer profiles and
purchasing values in 2015 and 2016 are attained and segmented using the RFM and CLV
models. High-value and profitable customers are identified. The developed system predicts the
customers’ next destinations to facilitate the promotion of customised packages to potential
clients. The model’s framework is shown in Figure 1.

2. Customer segmentation and competitor pricing data mining

Understanding and segmenting customers are essential to retaining high-value customers and
acquiring new customers in the online travel business. Analysing the online shopping behaviour
of these segmented customers may provide useful insight into the marketing of customised
travel package to high-value customers at the right time. The RFM model has been adopted to
assess customer value based on how recently a customer has purchased products or
services from a company (i.e. recency), how often the customer makes purchases
(i.e., frequency) and how much the customer spends in a specified period (i.e., monetary;
Mohammadian and Makhani, 2016; Hu and Yeh, 2014; Hosseini et al., 2010). Lumsden et al. (2008)
 IJRDM Price changes
Customer profile
46,4 by date and
destination input

Price data Customer

mining profiling

408
Customer
segmentation
via RFM and CLV
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Customer purchasing behaviour analysis

Predictive analysis

Figure 1. Marketing intelligence and pricing strategies

Model framework • Pricing policy
for customer • Product customisation promotion policy
segmentation,
behaviour and Customer segmentation, behaviour and
prediction analysis prediction analysis model

indicated that RFM values should be firm-specific and based on the nature of the products.
Customer behaviour can be quantified through the RFM model using the customer quintile
method (Miglautsch, 2000) or behaviour quintile method (McCarty and Hastak, 2007).
As a quintile is a group of numbers representing 20 per cent of the values in a larger dataset,
it has the advantage of having equal numbers of customers in each segment. A customer
quintile follows this principle in segmenting customers equally by comparing them with
designated RFM parameters and scores. The customers with the highest RFM scores are
generally categorised as the most profitable (Hosseini et al., 2010). However, segmentation via
the quintile method may be biased if a high percentage of customers has only purchased once in
the frequency measurement. This may result in two or three quintiles having identical
behaviour; that is, the customers in frequency scores 2 and 3 behave identically to those in score
1. The behaviour quintile method sorts customers by generating arbitrary cutoffs on percentage
behaviour for solving the sensitivity problem of the customer quintile method (Dursun and
Caber, 2016). It has the advantage of clustering customers with similar behaviour.
Overall, 110,843 customers from the transaction data are obtained and segmented
according to the customer quintile method. A recency scoring scheme is established by scoring
one of the five intervals from 1 to 5 for each customer identification number based on the
customers’ travel booking dates in decreasing order. For example, a customer with a booking
date of yesterday would have a score of 5. Table I shows the quintile scoring of recency.

Quintile score Recency (days) Frequency (purchase number) Monetary (USD)

1 [41, +∞) 1 (0, 1,724.93]

2 [31, 40] [1, 2.8915] [1,725, 2,621.10]
Table I. 3 [15, 30] [2.8915, 4.3369] [2,621.36, 4,154.44]
Quintile RFM scoring 4 [8, 14] [4.3369, 7.0229] [4,154.44, 6,829.24]
for an OTA in 2016 5 [0, 7] [7.0229, +∞) [6,829.24, 151,624.50]
 Frequency scoring is derived according to the number of purchases in a given period by Customer
categorising them into intervals based on the average remaining frequency values within the online
designated period in an ascending order. For example, in the 2016 data set, the shopping
five intervals are calculated using the mean of the total number of purchases: 1, 1ox ⩽ 2.8915;
2.8915ox ⩽ 4.3369; 4.3369ox ⩽ 7.0229; andW7.0229, with a score from 1 to 5, respectively. experience
A high frequency score implies that a customer has a greater customer loyalty or a high
product demand and that the customer is more likely to purchase products repeatedly. For 409
monetary scoring, customers are classified into five quintiles according to the total amount
spent in a given period, with a score of 1 to 5, in ascending order for the monetary amount.
CLV is often used as an indication or prediction of net profit attributed to the entire future
relationship with a customer. Venkatesan and Kumar (2004) referred to CLV as the application
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of contemporary finance principles in the assessment of customer value and relationship

management. It is used as a metric for customer selection and marketing resource allocation.
Verhoef and Lemon (2013) defined CLV as a core customer-centric metric that is calculated as
the net present value of all future profits derived from a customer over his or her lifetime with
a firm. Uncles et al. (2003) determined the CLV to be a value whose numerator is the net profit
obtained in each period and whose denominator transforms profit into a current value. Various
CLV models and applications have been developed to assist OTA firms in identifying potential
customers with high purchasing power (Safari et al., 2016; Wang, 2015; Fan and Ku, 2010;
Kumar and Rajan, 2009). In one case, the CLV model depends only on the expected and directly
attributable in- and out-payments (Bauer et al., 2003). These models however fail to consider
the possible alterations in their competitor and customer migration. Thus, it is necessary to
take the probability of individual customer churn into account (Ascarza et al., 2018).
Having evaluated the data collected from the OTA, the resulting RFM values are
consolidated and summarised in Table I. The recency values are provided with respective
recency codes from 1 to 5 based on equal quintile distribution. Khajvand et al. (2011) estimated
CLV based on RFM analysis. Sarvari et al. (2016) suggested that the three RFM variables are
different and should be based on the characteristics of the industry. A weighted RFM is
calculated with the weighted values of 10, 30 and 60 per cent of the RFM values, respectively.
To identify the top 0.1 per cent of valuable customers from the 58,545 customers in 2015 and
64,824 customers in 2016, the CLV cutoff is set to 4.6 out of 5. Then, 57 and 55 customers are
segmented as the best customers of 2015 and 2016, respectively. These are the highest
potential online customers with repeated purchases and large monetary amounts spent on
travel. Their online purchasing behaviour with respect to various attributes, such as OTA
price changes, conversion rates, associations with next travel destinations, frequency of travel
and money spent in designated periods, are analysed.
The profiles and purchasing behaviour of segmented customers in the OTA are obtained
and analysed with its competitors’ pricing crawled through a Python programme and a
server. The prices of five of the OTA’s competitors, including Expedia, Ctrip, Hutchgo,
Wing On and CheapTickets, for ten travel destinations are retrieved three times daily at
12:00 a.m., 10:00 a.m. and 2:00 p.m., which the OTA under study (OTA x) considers as the
times with the highest online transaction volumes. The captured data sets for the flight
prices of the five OTAs from Hong Kong to ten selected destinations, including Singapore
(SIN), Shanghai (SHA), Tokyo (TYO), Bangkok (BKK), Taipei (TPE), Kaohsiung (KHH),
Osaka (OSA), Seoul (SEL), Manila (MNL) and London Heathrow (LHR), are stored in a
developed database for further correlation and predictive analysis.

3. Customer online shopping behaviour (COSBA) analysis

3.1 Customer purchasing behaviour against changes in competitors’ ticket prices
As airline ticketing is one of the OTA’s main revenue sources, gaining the airline ticketing
market will always be a challenge for OTA x. Recent studies have indicated that customers
 IJRDM are most likely to purchase flight tickets through OTAs offering low prices (Kim et al., 2007a, b).
46,4 Pricing strategy is therefore one of the most important attributes in this competition. Customers’
online purchasing behaviours often changes with the changes in competitors’ ticket prices.
To verify this, the fluctuations in the competitors’ ticket prices that may have an impact on the
customer purchasing behaviour from OTA x are reviewed. Analysing this impact would help
OTA x compete with its competitors more effectively and thereby avoid customer churn.
410 A regression analysis of OTA x’s customers’ flight ticket purchasing behaviour from
Hong Kong to the top ten most-visited destinations is carried out against OTA x’s
competitors’ ticket price fluctuations, obtained from the data crawling system.
The destinations are indexed as the first to tenth destinations. For each destination, the
data set includes the price data from the five competitors and the transaction data provided
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by OTA x. The price data of each competitor are collected online by a data crawling
programme at the three internet rush hour times (i.e. 12:00 a.m., 10:00 a.m. and 2:00 p.m.).
The departure dates of the crawled tickets are two weeks after the crawling dates. The data
collected above are from 23 November 2016 to 31 December 2016. These dates are indexed
as the 0th to 38th days.
This analysis uses a linear function to determine the relationship between the ticket price
fluctuations of OTA x’s five competitors and the OTA x purchase number. The notations are
as follows:
• Ytm: the purchase number at OTA x on the tth day for destination m, t ¼ 1, …, 38,
m ¼ 1, …, 10.
• Pitm: the average price of competitor i on the tth day for destination m, calculated as
the average of the three prices recorded at 12:00 a.m., 10:00 a.m. and 2:00 p.m., i ¼ 1,
…, 5; t ¼ 1, …, 38; m ¼ 1, …, 10.
• ΔPitm: the price fluctuation of competitor i on the tth day for destination m, which
equals the difference in the average prices on the tth day and on the t−1th day, i.e.
ΔPitm ¼ Pitm−Pit−1m, i ¼ 1, …, 5; t ¼ 1, …, 38; m ¼ 1, …, 10.
Then the regression model can be represented as follows:
X
5
Y tm ¼ bm þ aim DP itm þetm t ¼ 1; . . .; 38; m ¼ 1; . . .; 10 (1)
i¼1

where αim and βm are the coefficient of the ith competitor’s price fluctuation and the
intercept term of the regression model for destination m, respectively, εtm is the error term of
the tth observation of destination m.
The results of the regression models for the ten destinations are shown in Tables II
and III. The p-values of the coefficients in Table III are all greater than 0.05. This shows that
there is no significant relationship between OTA x’s customer purchasing behaviour and its
competitors’ ticket price fluctuations against those of the previous days. It could be
observed that insignificant results would be the number of purchases obtained on the
purchasing date in the dataset is focused on the traditional analysis of data crawling on
two weeks before the departure date. Further development can be carried out on the
regression analysis of the dataset to extend the purchasing dates on which for each
departure date of t, the average price of competitor i for destination m, Pitm, is collected for
t ¼ t14; . . .; t1.

3.2 Price changes against customer purchasing behaviour in OTA x

According to the observations from OTA x, price changes in one destination may change the
purchase of tickets to other destinations within the OTA itself. Regression analysis of OTA x’s
 customer purchase number for one destination against the ticket price fluctuation of other Customer
destinations of OTA x are conducted on the flight ticket data of the ten destinations listed in online
Section 3.1. The data sets of each destination include the price and transaction data provided by shopping
OTA x. All of the data collected above are dated from 11 November 2016 to 31st December 2016.
The dates are indexed from the 0 to 50 day. The notations are as follows: experience
• Ytm: the purchase number at OTA x on the tth day for destination m, t ¼ 1, …, 50,
m ¼ 1, …, 10. 411
• Pit: the average price of OTA x on the tth day for destination i, calculated as the
average of the three prices recorded at 12:00 a.m., 10:00 a.m. and 2:00 p.m., i ¼ 1, …,
10; t ¼ 1, …, 50.
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• ΔPit: the price fluctuation of OTA x on tth day for destination i, which equals
the difference in the average prices on the tth day and on the t−1th i.e. ΔPit
¼ Pit − Pit−1; i ¼ 1, …,10; t ¼ 1, …, 50.
Then the regression model can be represented as follows:

X
10
Y tm ¼ bm þ aim DP it þetm t ¼ 1; . . .; 50; m ¼ 1; . . .; 10 (2)
i¼1

where αim and βm are the coefficient of the ith destination’s price fluctuation within OTA x
and the intercept term of the regression model for destination m, respectively, εtm is the error
term of the tth observation of the regression model for destination m.

m Des. α1m α2m α3m α4m α5m βm

1 SIN −0.0002 0.0002 −0.0001 −0.0024 0.0008 5.4

2 SHA −0.0024 0.0033 −0.0012 −0.0032 0.0023 5.3
3 BKK −0.0183 0.0299 −0.0172 0.0105 −0.0060 18.9
4 TYO 0.0008 −0.0008 0.0010 −0.0006 0.0023 12.3
5 TPE −0.0141 0.0634 −0.0229 0.0360 −0.0496 40.8
6 KHH 0.0008 −0.0007 0.0054 0.0072 −0.0083 3.6 Table II.
7 OSA 0.0021 0.0013 0.0017 −0.0013 −0.0003 7.4 Values of the
8 SEL 0.0020 0.0084 −0.0015 −0.0056 0.0017 10.5 coefficients and
9 MNL 0.0043 −0.0008 −0.0004 −0.0015 −0.0018 3.9 intercept of each
10 LHR 0.0000 0.0034 0.0001 −0.0001 −0.0001 1.7 destination

m Des. α1m α2m α3m α4m α5m βm

1 SIN 0.972 0.963 0.967 0.569 0.648 0.000

2 SHA 0.537 0.413 0.794 0.673 0.261 0.000
3 BKK 0.173 0.544 0.426 0.778 0.714 0.000
4 TYO 0.922 0.935 0.830 0.745 0.563 0.000
5 TPE 0.851 0.421 0.640 0.395 0.383 0.000
6 KHH 0.893 0.933 0.505 0.512 0.385 0.000 Table III.
7 OSA 0.445 0.780 0.410 0.706 0.718 0.000 p-values of the
8 SEL 0.627 0.055 0.671 0.361 0.435 0.000 coefficients and
9 MNL 0.157 0.545 0.852 0.605 0.590 0.000 intercept of each
10 LHR 0.948 0.329 0.798 0.869 0.819 0.000 destination
 IJRDM The aim of this regression model is to discover whether customers are likely to purchase
46,4 tickets to another destination when other destination prices change. The results are shown
in Tables IV and V. Only three of the p-values of coefficients in Table V are less than 0.05,
namely the p-values of α39 (BKK), α89 (SEL) and α99 (MNL), indicating that the price
fluctuations for these three destinations have an impact on the purchase of the ninth
destination (MNL). The values of the three corresponding coefficients are 0.0035, −0.0022
412 and 0.0015, respectively. These results suggest that the purchase number of MNL on the
tth day increases compared with that of the t−1th day, when the price of BKK or MNL
increases or when the price of SEL decreases compared with their prices on the t−1th day.
The pattern has been observed particularly in the family and housemaid customer groups.
However, for the regression model of the ith destination other than MNL, there is no
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significant relationship between the purchase behaviour for the ith destination and the price
fluctuations of the other destinations of OTA x.

3.3 Marketing strategies against conversion rate

There is a growing number of customers gather pre-purchase information from the internet
(Adjei et al., 2009). Customers prefer to compare flight ticket prices from different OTAs
before making reservations. Customers can use many channels to enter an OTA website,
such as organic search, paid search, referral and direct search. Organic search refers to
customers entering keywords into the search engine and the latter showing the relevant
website results. Paid search means that a company pays the search engine to show up at the
top of the search results. Referral pertains to when customers are directed to a website from
other sources of the search engine and direct search means that customers enter a site by
directly typing the site address. Furthermore, e-mail, social media and advertising are other
ways to enter a website.

m Des. α1m α2m α3m α4m α5m α6m α7m α8m α9m α10m βm

1 SIN 0.0004 −0.0008 0.0000 0.0001 0.0000 0.0030 0.0003 0.0008 −0.0001 0.0000 5.9
2 SHA −0.0007 −0.0007 0.0022 0.0000 0.0026 −0.0011 −0.0005 −0.0006 −0.0003 0.0001 5.3
3 BKK 0.0008 0.0007 0.0016 0.0003 0.0002 0.0053 0.0010 0.0025 −0.0003 −0.0006 17.6
4 TYO 0.0002 −0.0036 0.0068 −0.0013 0.0007 0.0108 0.0015 0.0001 −0.0001 −0.0002 11.2
5 TPE 0.0041 0.0122 −0.0021 0.0031 −0.0010 0.0071 0.0010 −0.0062 0.0011 0.0001 47.9
Table IV. 6 KHH 0.0000 0.0012 −0.0001 0.0000 0.0011 0.0015 0.0001 0.0005 −0.0003 0.0001 4.0
Values of the 7 OSA 0.0001 −0.0005 −0.0012 0.0002 0.0019 0.0031 −0.0009 0.0020 −0.0007 −0.0002 7.1
coefficients and 8 SEL 0.0004 0.0041 −0.0052 0.0002 −0.0008 0.0030 0.0003 0.0023 0.0006 0.0001 11.4
intercept of each 9 MNL 0.0002 0.0002 0.0035 0.0004 −0.0020 0.0031 0.0008 −0.0022 0.0015 0.0000 4.0
destination 10 LHR −0.0001 0.0009 0.0006 0.0002 0.0012 −0.0023 −0.0001 −0.0010 0.0002 0.0000 1.8

m Des. α1m α2m α3m α4m α5m α6m α7m α8m α9m α10m βm

1 SIN 0.643 0.587 0.991 0.926 0.993 0.414 0.779 0.534 0.883 0.999 0.000
2 SHA 0.243 0.543 0.228 0.986 0.320 0.695 0.528 0.548 0.708 0.282 0.000
3 BKK 0.666 0.839 0.767 0.850 0.982 0.534 0.631 0.425 0.913 0.102 0.000
4 TYO 0.952 0.437 0.346 0.592 0.947 0.346 0.604 0.985 0.969 0.747 0.000
5 TPE 0.547 0.335 0.912 0.631 0.971 0.818 0.892 0.582 0.896 0.950 0.000
Table V. 6 KHH 0.959 0.313 0.947 0.999 0.647 0.602 0.934 0.617 0.718 0.352 0.000
p-values of the 7 OSA 0.960 0.832 0.748 0.845 0.717 0.607 0.574 0.361 0.670 0.343 0.000
coefficients and 8 SEL 0.755 0.127 0.214 0.865 0.894 0.641 0.875 0.342 0.716 0.649 0.000
intercept of each 9 MNL 0.762 0.827 0.039 0.457 0.404 0.241 0.202 0.022 0.042 0.897 0.000
destination 10 LHR 0.865 0.278 0.644 0.555 0.492 0.228 0.762 0.173 0.753 0.545 0.000
 To investigate the efficiency of different channels for OTA x, the conversion rates of Customer
various channels are studied with the use of Google Analytics engine (Table VI). online
The conversion rate is the percentage of visits that result in an e-commerce transaction. shopping
Conversion rates are calculated by dividing the number of conversions by the number of
total ad clicks that can be tracked to a conversion during the same period. If one is tracking experience
more than one conversion action or choosing to count every conversion, the conversion rate
obtained may be over 100 per cent, as more than one conversion may be counted for each 413
click, similar to the results in Table VI. The top three conversion rates are 58.59 per cent,
36.5 per cent and 29.75 per cent accessed via direct, organic and paid search, respectively.
The relatively high organic search rate means that people searching for OTA x actually
click on its website from the listing, suggesting that adding keywords, such as “OTA x” to
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the relevant AdWords campaigns may help the agency attract more customers.

3.4 Travel destination against transaction date and departure date

Studies have been conducted on last-minute purchases of online travel services and how the
internet affects travel behaviour (Nusair and Kandampully, 2008; Greenspan, 2004), but
the effect of customer purchasing behaviour on last-minute purchases and travel time,
which is critical for marketing and promotion, lacks detailed analysis. The relationship
between the distance of a destination and the tendency to purchase flight tickets in advance
is evaluated using the regression analysis of the average purchase lead time against the
flight duration time. The average purchase lead time is filtered from the 2016 transaction
data of OTA x by the travel destinations and the flight duration time is retrieved from
Google Maps. The observations of this regression analysis are destinations with more than
300 transactions in the previous two years. In total, 39 destinations satisfying this criterion
are selected, indexed as the 1st to 39th observation. The notations are as follows:
• Ti: the average purchase lead time for the ith destination, where the lead time is
calculated as the difference between the transaction date and the actual departure
date; and
• Di: the flight duration time from Hong Kong to the ith destination.
The regression model can be represented as follows:
T i ¼ 40:11 þ4:409Di þei i ¼ 1; . . .; 39 (3)
where 4.409 and 40.11 are the coefficient and intercept of the regression model, respectively,
and εi is the error term of the ith observation. The scatter plot of the data is shown
in Figure 2. The p-values of the coefficient and intercept are less than 0.05. This means that
the model is statistically significant at the 0.05 level, showing that a relationship between
the flight duration time and purchase lead time does exist. The results indicate that OTA x
may try to promote its flights according to this relationship.

Channel % of total conversions

Direct search 58.59

Organic search 36.50
Paid search 29.75
Referral 18.31
Other advertising 17.69
E-mail 4.01 Table VI.
Social network 2.93 Conversion rates of
Display 0.32 different channels
 IJRDM Fitted line plot
46,4 Average date difference = 40.11 + 4.409 time(hr)
110 14.2009
S
R2 63.2%
100 R 2(adj) 62.2%

90
Average date difference

414 80

70

60
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50

40

30

20
Figure 2. 0 2 4 6 8 10 12 14 16
Scatter plot Time(hr)
of the data R2
Note: The line indicates the predictions and the points are the actual data

3.5 Holiday booking behaviour

In 2016, 11.285 million local residents departed from the Hong Kong International Airport,
an 8 per cent increase from 2015 (Government of the Hong Kong Special Administrative
Region, 2017). Approximately 70 per cent of Hong Kong residents’ annual leave is spent on
outbound travel (Visa, 2015). Furthermore, public holidays are usually the peak travel
period of outbound tourism. Thus, how to efficiently implement holiday promotions is a
challenge for the OTAs. Investigating customers’ travel behaviour on public holidays is one
way to enhance the promotion efficiency for OTA marketing departments.
To study the flight ticket purchasing behaviour during these public holidays, the
holiday bookings at OTA x to the top ten visited destinations (indexed as Des. 1 to Des. 10)
are analysed. The lead time of flight tickets during the holidays to different destinations
are distinguished so that better marketing recommendations can be made in the coming
section. The data on local resident departures during the public holidays in Hong Kong are
retrieved from OTA x’s transaction data. The number of purchases on each holiday is
shown in Table VII. The italic values are the holidays with the highest number of
purchases for each destination. It shows that Easter and Christmas are the most popular
holidays for outbound travel.

Holidays Des. 1 Des. 2 Des. 3 Des. 4 Des. 5 Des. 6 Des. 7 Des. 8 Des. 9 Des. 10

Lunar New Year 68 108 118 56 230 29 33 66 110 24

Easter 245 407 309 123 803 192 40 292 226 24
Ching Ming Festival 146 258 208 80 489 104 37 195 191 30
Labour Day 136 158 187 67 412 86 24 161 93 36
Birthday of Buddha 134 144 144 85 471 126 35 181 95 48
Tuen Ng Festival 82 118 162 89 386 97 48 177 67 77
HKSAR Establishment Day 129 163 261 97 424 94 47 208 132 48
Mid-Autumn Festival 181 185 197 81 437 87 39 190 107 60
Table VII. National Day 131 128 129 75 277 64 27 133 86 63
Number of purchases Chung Yeung Festival 159 182 190 105 540 93 70 249 104 79
for holidays’ seasons Christmas 202 258 338 186 717 110 87 327 507 112
 Table VIII shows the average purchase lead time of each holiday, representing the number Customer
of days that customers are likely to purchase in advance. It helps to predict the online
recommended dates for OTA x to engage in promotion for the upcoming public holidays in shopping
2017 and 2018. The corresponding recommended dates are listed in Table IX.
experience
4. COSBA analytics system
With the development of the model framework for segmenting high-value customers, 415
analysing their online purchasing behaviour and promoting customised packages through
predictive analysis, a COSBA system that incorporates competitor pricing, customer
segmentation and customised service prediction modules is developed. The system flow for
the COSBA system is shown in Figure 3. Upon crawling from the website provided by the
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Python programme, pricing data in each captured timeframe are stored in the database
along with the customer data. Customer profiles are segmented using the weighted RFM
model, and the customer purchasing behaviour in response to competitors’ price changes is
further analysed. The next destinations of identified high-value customers are predicted
using a priori association rules (Borgelt and Kruse, 2002) and customised packages are
promoted to targeted customer segments.

Des. Des. Des. Des. Des. Des. Des. Des. Des. Des.
Holidays 1 2 3 4 5 6 7 8 9 10 Average

Lunar New Year 22.8 21.4 25.0 22.4 22.9 26.4 24.2 23.5 21.6 19.6 23.0
Easter 40.0 39.1 37.2 41.2 37.0 39.2 42.3 41.1 39.7 41.9 39.9
Ching Ming Festival 38.3 36.8 36.3 45.7 38.2 35.2 41.1 37.7 39.7 52.1 40.4
Labour Day 39.2 39.6 49.1 32.6 37.6 37.7 38.2 42.6 33.7 52.9 40.3
Birthday of Buddha 33.2 31.3 39.8 40.9 41.5 45.1 45.0 49.5 32.7 62.9 42.2
Tuen Ng Festival 48.2 34.6 45.7 44.3 44.3 57.0 54.9 55.4 39.0 66.5 49.0
HKSAR Establishment
Day 50.8 37.1 53.6 50.8 45.5 65.4 56.6 72.1 41.3 61.1 53.4
Mid-Autumn Festival 61.2 44.2 58.8 54.9 51.0 57.4 42.7 63.1 45.8 61.8 54.1 Table VIII.
National Day 58.9 42.7 50.3 48.8 61.0 45.9 39.8 57.6 43.6 60.2 50.9 Average purchase
Chung Yeung Festival 61.2 47.1 61.3 43.8 57.0 47.0 63.9 69.9 41.2 59.8 55.2 lead time (days) for
Christmas 72.7 74.9 74.5 73.7 75.7 77.7 67.6 108.0 71.2 76.6 77.3 holiday seasons

Date of holiday (mm/dd/yyyy) Recommended promotion date (mm/dd/yyyy)

HKSAR Establishment Day 07/01/2017 05/08/2017

National Day 10/01/2017 08/11/2017
Mid-Autumn Festival 10/05/2017 08/11/2017
Chung Yeung Festival 10/28/2017 09/02/2017
Christmas 12/25/2017 10/08/2017
Lunar New Year 02/16/2018 01/24/2018
Easter 03/30/2018 02/18/2018
Ching Ming Festival 04/05/2018 02/23/2018
Labour Day 05/01/2018 03/21/2018
Birthday of Buddha 05/22/2018 04/09/2018
Tuen Ng Festival 06/18/2018 04/30/2018
HKSAR Establishment Day 07/01/2018 05/08/2018
Mid-Autumn Festival 09/25/2018 08/01/2018 Table IX.
National Day 10/01/2018 08/11/2018 Recommended
Chung Yeung Festival 10/17/2018 08/22/2018 dates for OTA
Christmas 12/25/2018 10/08/2018 advertisements
 IJRDM After the customer segmentation described in Section 2, how to develop targeted marketing
46,4 strategies for the customers from the 4.6-5 CLV group is further studied. Association rules
analysis, a technique for discovering the relationship between items in large transaction
databases, is applied to the transaction database of this group to discover their hidden
patterns and provide better promotion services. The notations of the association rules
analysis are as follows:
416 • I ¼ {i1, i2, …, in}: the set of items where each item refers to one destination, n ¼ 71.
• D ¼ {T1, T2, …, Tm}: the transaction database where each transaction, Ti, refers to
the purchasing record of one customer (i.e., Ti consists of a set of items, Ti ⊆ I ), m is
the number of customers in the 4.6-5 CLV group, m ¼ 57 for the group in 2015 and
m ¼ 55 for the group in 2016.
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An association rule in the form of X⇒Y (X ⊆ I,Y ⊆ I ) indicates that if a customer buys X, he
or she is also likely to buy Y. There are three main measures in the association rules
analysis, including support, confidence and lift:
• Support (X, D). This indicates the popularity of X in database D, calculated as the
proportion of the transactions in which X appears:
Occurrence of X
Support ðX ; DÞ ¼
m
• Support (X⇒Y ). The proportion of transactions in which both X and Y appear:

Support (X⇒Y ) ¼ Support(X ∪Y,D)

• Confidence(X⇒Y ). This represents how often the rule X⇒Y is found to be true
(i.e., the probability of purchasing Y when X is purchased):

Confidence(X⇒Y ) ¼ Support(X∪Y,D)/Support(X,D)
• Lift(X⇒Y ). This value indicates the enhanced degree of a targeted marketing
strategy based on X⇒Y against a random choice targeted marketing strategy.
The lift of the rule also represents the probability of purchasing Y when X is
purchased, but with the consideration of Y’s popularity:

Support ðX [Y ; DÞ
LiftðX ) Y Þ ¼
Support ðX ; DÞ  Support ðY ; DÞ
A lift value greater than 1 shows the degree to which the occurrence of X and Y are associated
to each other and makes the rule X⇒Y potentially useful for the market prediction.

Customer
data
OTA website
. . .

Web Data
Web data Database
Figure 3. server processing Reports
OTA website crawling storage
System flow model tools
(Python) (access) (VBA)
. . .

for customer online

shopping behaviour
analytics
OTA website
 An association rule is required to satisfy a minimum support and minimum confidence at Customer
the same time. In this study, the minimum support and minimum confidence are set to 5 and online
45 per cent, respectively. shopping
The profiles of the 4.6-5 CLV customer groups of 2015 and 2016 in the form of association
rules are shown in Tables X and XI, respectively. experience
For the 2015 transaction database, the association rules X⇒Y shown in Table X have
confidence values between 45.5 and 50 per cent, indicating that about half of the customers 417
who buy tickets to X would like to buy tickets to Y. Furthermore, when one does buy tickets to
Y, he or she is very likely to also buy tickets to X, as inferred from the high lift values, which
are all greater than 2. For example, as the lift value for rule {BKK⇒SIN} is the highest, the
impact of promotions on tickets to SIN would be more significant than to other destinations
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when the oriented group is the customers who have bought tickets to BKK. The effect of
sending promotion packages for NRT to customers who have bought tickets to ICN would be
greater than sending promotion packages for MNL. These customers would have a higher
chance in further purchase tickets to NRT. Similarly, for the 2016 transaction database, as
shown in Table XI, only one association rule simultaneously satisfies the minimum support
and minimum confidence. As this association rule has a lift value of 3, the promotion based on
this rule would be promoting tickets to NRT to customers who have bought tickets to LAX.
This is due to the attraction of using NRT as the customers’ transshipment choice when they
are travelling to LAX. The promotion strategy based on the mining results would have an
obvious enhanced customer response rate compared to that of a random promotion.
With the identified high-valued customers and the integrated system including pricing,
customer profile and behaviour and service prediction modules, the results of predicting
subsequent destinations have great implications for travel agencies. Online customer behaviour is
captured and analysed, facilitating the formation of promotion strategies, especially for OTAs
with limited resources for promoting packages to millions of consumers. The promotion packages
and advertisements that reach each customer are expected to be tailored and customised in the
era of overwhelming customer promotion information, especially for high-valued customers.

5. Conclusion
Online shopping demands, including travel tickets and packages, are continuously
increasing. Travel companies such as OTAs are actively exploring how customers navigate
OTAs and make their purchase decisions. A process analysis of customer online navigation
and purchasing on OTA x is evaluated in this study. Customer relationship management is
reviewed, and customer segmentation is proposed using weighted RFM and CLV models.
Overall, 110,843 customers are segmented into different customer groups and 0.1 per cent
customers are identified as high-value customers based on their RFM purchasing behaviour.

Rule ID Association rules Support (%) Confidence (%) Lift

1 ICN⇒MNL 8.8 45.5 2.36

2 ICN⇒NRT 8.8 45.5 2.59 Table X.
3 YVR⇒ICN 7.0 40.0 2.07 Profile of the 2015
4 BKK⇒SIN 8.8 50.0 2.85 4.6-5 CLV
5 MNL⇒ICN 8.8 45.5 2.36 customer group

Rule ID Association rules Support (%) Confidence (%) Lift Table XI.
Profile of the 2016 4.6-5
1 LAX⇒NRT 10.9 60.0 3.00 CLV customer group
 IJRDM To further analyse customer purchasing behaviour, transaction data are analysed from
46,4 the perspectives of the price change and lead time of the purchase. Two regression models
are implemented to analyse purchasing behaviour against ticket price change. The first
regression is conducted between OTA x’s customer purchasing behaviour and its
competitors’ ticket price fluctuation against the previous day. The second regression is
conducted on the price changes to various destinations in OTA x against its customers’
418 purchase decisions. The results reveal that the number of purchases in the tested panel data
could be extended from the traditional analysis of two weeks before the departure date to
the daily purchase number over the two weeks before the departure date. With each
departure date, panel data with 14 observations are formulated to analyse and obtain
further results on the relationship between purchase behaviour and price change.
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In reviewing the efficiency of different channels for OTA x, the conversion rates
of various channels are evaluated. The top three conversion rates are direct search
(58.59 per cent), organic search (36.5 per cent) and paid search (29.75 per cent). This suggests
that adding keywords of OTA x to relevant AdWords campaigns may help the agency
attract more customers. In the analysis of customer behaviour on purchasing lead time,
two analyses are conducted: one on the relationship between the lead time and flight
duration time and one on the relationship between the lead time and public holidays.
Recommendations have been provided to OTA x that the time in promoting the holiday
flights to the customers should be adjusted. For example, the promotion of Christmas flights
can start as early as the beginning of October. The numeric relationship between the lead
time and flight duration time for OTA x is lead time ¼ 40.11 + 4.409 × flight duration time.
To enhance customer segmentation and behaviour prediction for customising the
product packages, a novel integrated data analytics model on customer segmentation,
competitors’ price change data mining and customer behaviour prediction is developed.
The model is applied in OTA x and insights are provided to the company on its customers’
reactions to the price changes of its ten competitors on the ten most popular travel
destinations. The model can assist OTAs with customer segmentation and future product
package promotion strategies. With the designed model, a COSBA system with competitor
pricing, customer segmentation and customised service prediction modules is developed.
The next destinations of the high-value customers identified are predicted (e.g. ICN and
MNL, ICN and NRT, YVR and ICN, BKK and SIN and LAX and NRT). Future analysis
can be extended using more customer demographic information, behaviour on online
user-interface navigation and the time prediction of customer purchasing. The historical
performance of customers can also be added to enhance the projection accuracy.

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Corresponding author
Eugene Wong can be contacted at: eugenewong@hsmc.edu.hk

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